PMC Bank case: Sitharaman promises legislation

Finance Minister Nirmala Sitharaman, who faced angry depositors of scam-hit PMC Bank here on Thursday, announced setting up of a panel to recommend legislative changes to ensure better governance at co-operative banks.

If necessary, the government will amend the laws governing cooperative banks in the winter session of Parliament, she said at a press conference.

After a Rs 4,500-crore scam came to light at Punjab & Maharashtra Cooperative Bank, the Reserve Bank, which put curbs on withdrawal of funds from the bank, had also said that it would examine if the regulatory framework needed tweaks.

Sitharaman said a committee of secretaries of Economic Affairs and Financial Services, Rural Affairs and Urban Development ministries and a deputy governor of the RBI would be formed.

Through this committee, the government intends to "understand and take necessary legislative steps to prevent such things from happening in the future, empower the regulator better," she said.

Stating that she is not presuming that there are shortcomings in the present laws, the minister said the panel will study the issue and "if necessary, in the forthcoming winter session of Parliament itself, we will be bringing in any amendments which may be necessitated."

Concerns exist about cooperative banks often becoming fiefdoms of politicians or other influential persons, giving a go-by to banking regulations and leading to soaring of bad loans and putting in peril depositors' money. Many cooperative banks have failed in the last two decades, and PMC Bank is among the largest such banks.

After the scam came to light last month, the RBI capped withdrawals from the bank at Rs 1,000 and later increased it to Rs 25,000 following protests by depositors.

The bank had allegedly lent over 70 per cent of its Rs 9,000 crore in loans to near-bankrupt realty player HDIL.

Irate depositors gathered outside the BJP's office in south Mumbai ahead of Sitharaman's press conference.

When she arrived, they shouted slogans, demanding that their money should be returned to them.

Sitharaman and a few of the depositors went inside and had a brief conversation.

"I heard them about their problems and explained to them that multi-state cooperative banks...are regulated by the RBI," she later said, adding that the government's role is limited.

But she assured that she will speak to RBI Governor Shaktikanta Das and convey the "urgency and distress" of the depositors.

When asked when the depositors can get their money back, she said it was a process-driven exercise between RBI and the bank administrator appointed by the RBI. "But, I can emphasise that it has do be done quickly," she said.

Harbans Singh, a bank customer, told reporters that the depositors expected the minister to give an assurance that their money was safe, but they were disappointed.

"Sixteen lakh depositors are in distress. What is our fault? You have got Rs 4,000 crore assets. Sell it and start the bank and then go ahead with whatever action you want against the accused," he said.

Meanwhile, to a question on whether the government accepts there is an economic slowdown, the finance minister evaded a direct reply, and said, "We are giving relief to all sectors who need help."

Since the Budget in July, she has been meeting representatives of various industrial sectors, and sector-wise intervention is being made regularly, Sitharaman said.

The minister praised the five-year tenure of Devendra Fadnavis government in Maharashtra, which is facing elections on October 21, and described the chief minister as proactive.

Asked about farmer suicides, she said such incidents were heartbreaking. The state government understands the gravity of the situation and has done well to reach out to distressed farmers, she said.